Square Said to Have Discussed Caviar Sale With Uber, GrubHub

Square Said to Have Discussed Caviar Sale With Uber, GrubHub

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October 11, 2016 — 3:20 PM EDT
  • Price of about $100 million proposed for food-delivery unit
  • Payments company couldn’t find buyer willing to pay enough
Photographer: danny4stockphoto/Getty Images/iStockphoto

Square Inc. tried to sell its food-delivery business, Caviar, but couldn’t find a buyer willing to pay enough, according to people familiar with the matter.

Square discussed a potential sale of Caviar with Uber Technologies Inc., GrubHub Inc. and Yelp Inc. Other prospective buyers had more informal talks with the publicly traded payments company, the people said. Square received inbound interest which initiated the talks, according one of the people. They asked not to be identified because the discussions were private.

Square proposed a price of around $100 million with prospective buyers and was rebuffed, the people said. Uber floated a value for Caviar that Square considered too low, one of the people said. Caviar loses money, but the extent of its losses aren’t disclosed in Square’s financial statements.

Conversations between Square and some of the potential acquirers began at the end of 2015, two of the people said. Talks continued into the second quarter of 2016, one of the people added. Representatives at Square, Uber and Yelp declined to comment.

"We look at a lot of companies all the time and there are a lot of different reasons we don’t do deals," a spokeswoman for GrubHub wrote in an e-mail. She declined to comment further.

Silicon Valley food-delivery startups have shown signs of faltering. Postmates Inc. has been slow to raise a new round of financing. This January, DoorDash Inc. raised financing at a $600 million valuation, the same as its previous round. The company had initially sought a $1 billion price tag.

Meanwhile, Uber may be filling the void, investing globally in its food-delivery business UberEats. GrubHub, the most successful public food-delivery company, has seen its stock price soar 64 percent since the start of the year. Square shares are down almost 15 percent so far in 2016.

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Square purchased Caviar in August 2014 during a period of frenzied investment in food-delivery companies. The acquisition was an opportunity for Square to sell more of its other products to restaurants. Caviar may also help Square’s existing restaurant customers make more sales through delivery. Square paid $90 million in stock for the company, people familiar with the matter said. Square has not disclosed Caviar’s financial performance since the acquisition.

Square reports Caviar’s business within its software and data unit, which also includes other products like its lending arm, Square Capital. In the second quarter, this part of the company generated $30 million in revenue, up 130 percent from a year earlier. Cost of revenue from that segment doubled to $10 million in the same period.

Caviar pulled out of three markets in the recent months, including Atlanta, Minneapolis and Miami, according to one of the people familiar with the matter.

Throughout 2015, Square executives internally measured Caviar’s success based on its ability to grow order volume and revenue. This year, Square added a new goal: reducing Caviar’s losses, one of the other people said.

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